7 principles for improving economic opportunity for farmers and rural communities

Smallholder farmers can gain a lot from on-farm training, but many can’t afford the risk of trying and failing. Approaching it from the perspective of ‘farming as a business’ helps shift the focus from subsistence to profit. Off the field, farmers are trained on bookkeeping and traceability, so they understand better production planning, the costs associated with improved cultivation techniques, and how to use targeted investment to address areas for improvement.

 

At the same time, limited access to education, agri-training and technology, and banks and credit, result in yields being much lower than they should be. This threatens the reliability of Olam’s supply, while low incomes perpetuate poverty and discourage the next generation from becoming farmers.

 

There are 760,000 smallholders in Olam’s sustainability programmes - an uplift of 40% over the last two years, with farms covering 1.4 million hectares. Our approach to unlocking the economic potential of farmers through these programmes, was initially set in 2011 by the principles of the Olam Livelihood Charter which have now been absorbed into the framework of our sustainability insights platform AtSource, with its economic and social indicators. Focussing on everything from agri-training, to income diversification, this is what putting these principles into practice looks like:

 

1. Skills-building to grow farmer yields and income

 

The primary focus is to equip farmers with the knowledge and tools they need to achieve more crop from the same land, at a better quality and therefore higher income.

 

Our global network of hundreds of technical experts across our origins, deliver on-farm training to farmers on the gamut of Good Agricultural Practices (GAP) – from organic crop maintenance for Quinoa in Peru and correct irrigation for onion farmers in Egypt’s Western Desert, to biosecurity for Nigerian fish farmers.  We heard from one farmer in Barmer, India that he achieved a 20% higher yield for his 2020 cumin crop from the demo plot that he had applied organic practices to under Olam’s training. In his own words:

 

I think even if product costs are higher than normal chemical products, it’s worth it as it shows good ROI and win-win conditions for me.

Mr. Narpat Singh Bhati, Jhijhinyali Village

 

Smallholder farmers are the foundation of the global agriculture and food sector. It’s estimated that they produce around 30% of total crop production, making them critical to global food security. Olam relies on around 5 million smallholders for crops like cashew, cocoa, coffee, cotton and rice. Their ability to produce high yields of good quality and to earn a decent living is key to both short-term gains and to responsibly growing the business in the long-run.

 

350,000 farmers received GAP training in 2020. Yet many are still finding it difficult to implement and extract full value from it, which means we need to continually assess the effectiveness of these extension services, for both the farmer and Olam.

 

Comprehensive employee handbooks outline key concepts for designing extension programmes, covering the four general stages of project design; farmer motivation; finance and credit risk; and group formation and motivating extension staff.

 

As one of our coffee agronomists in Colombia once told me, “every farm is a different world” and every farmer and farmer’s situation is different. So rather than train all farmers under the same curriculum, or offer the same support, Olam is focusing on tailoring support according to their particular constraints and aspirations. Our longstanding presence at farm-gate has given us a deep understanding of the reality faced by farmers on the ground and allows us to segment farmers according to their particular situation and needs.  We can then support them with smaller, phased packages, making it more achievable and less overwhelming for farmers. This approach has been successfully piloted by the Coffee team in Peru and Uganda – through the Stepwise programme.

 

We are now expanding this across other origins, critically supported by the data provided by the Olam Farmer Information System (OFIS). It collects rich data from farmers and their communities -  everything from the number of children, to age of tree stock - and uses algorithms to generate tailored recommendations on yield, inputs, rehabilitation, GAP advice, among others, in the form of Farm Development Plans. Over 100,000 Farm Development Plans have been issued to farmers to date, to date and the advice can also be texted straight to the farmer’s mobile phone. OFIS also provides smallholders with a variety of tools for farm management and has generated over Additionally, OFIS is connected to AtSource, which gives both us and our customers visibility into the key challenges that farmers face, or by which they are impacted, so we can target interventions accordingly.

 

 

2. Financially empowering farmers

 

The lack of banking infrastructure in rural communities and risk aversion by financial institutions mean that smallholders’ access to banks, savings and loan facilities, and land are very often limited or denied. So, in addition to providing loans and advances for crop purchases and procurement of farming inputs and equipment, we are finding ways to change that. In Côte d’Ivoire, we help groups of women cotton farmers form Village Savings and Loans Associations (VSLAs), which enabled 1,870 women to save over US$135,000 in 2020, which they invest to create income generation activities such as small business ventures with the sale of food and agricultural products. Additionally, through outreach to community leaders, 340 women are now able to access land and farm cotton under their own names – a significant step in a region where traditionally only men may manage cotton farms.

 

Similarly, in Tanzania, we have worked with farmer associations to create savings groups, whereby they pool resources for rotating loans to group members. And in North Peru, several tripartite agreements with the local authority, municipality and farmer groups are helping farmers to access government grants to invest in organic quinoa production.

 

These gains in financial inclusion are the point of entry. The real goal is farmer prosperity, which is where we turn our attention to providing farmers with the opportunities and tools to empower themselves; to build sustainable incomes and forge a route out of poverty. In 2015, Olam partnered with the Federal Government of Nigeria and UN International Fund for Agricultural Development (IFAD) to form the Value Chain Development Program (VCDP). It works to connect smallholder rice farmers to markets, land, credit and other inputs, as well as deliver training to develop the necessary financial literacy and business management skills for farmers to engage with the market and supply the required volumes and quality.

 

For coffee farmers, being able to apply the right post-harvest techniques means they can produce superior quality coffee beans which, in a competitive market, are a differentiator and fetch higher prices. In 2020, we, together with our customers, paid US$26mn in quality premiums to farmers in our AtSource supply chains. Securing a fair price is more likely with direct access to testing facilities. Olam’s buying units are scattered across our sourcing origins, but in the vast coffee producing regions of Brazil, the Olam Coffee Truck serves as a mobile buying unit and quality testing lab, to drive closer connections with farmers.

 

 

3. Supporting seed choice and accessibility

 

Seed is the most critical input for a good harvest and the first decision that farmers make when growing crops. Yet less than 10 percent of the world’s smallholder farmers have access to the improved, quality seeds that can tolerate climate shocks and contribute to food security. 

 

Research grants awarded under the Olam Prize for Innovation in Food Security have helped scale-up ground-breaking research projects. They include a new non-GM strain of heat-tolerant wheat that is now established in a half-dozen countries in Sub-Saharan Africa, and Innovation Mapping for Food Security (IM4FS) – a unique mapping approach that’s giving smallholder farmers in Ethiopia a ‘best fit’ for what crops to grow, where and how. This year's award will be particularly timely due to the effects of COVID-19 and we're seeing submissions from around the world.

 

Across our own sourcing origins, we’re ensuring farmers receive sufficient good quality seeds in order to maintain the best quality and yield. After Thai Hom Mali rice farmers were hit by drought and flooding in the 2019 crop year, Olam teamed up with the Thai Rice Department to ensure access to 2.5 tonnes of quality seeds for 5,000 farmers. For coffee farmers in Africa battling low productivity on old farms, dedicated nurseries have supplied 13,000 Ivoirians with high-yielding, climate-resilient coffee seedlings, and for cocoa farmers, 5.2mn+ improved cocoa seedlings have been distributed since 2018.

 

In total, over 20,000 tonnes of Olam crop seeds and 3.9mn seedlings were distributed to farmers in 2020. As for this year, as part of an AtSource Infinity programme, 10,000 farmers bordering Congo’s Kahuzi-Biega National Park will receive over a million highly subsidised coffee seedlings to rejuvenate their farms, with access to improved varieties promoted by the National Agricultural Study and Research Institute (INERA).

 

 

4. Building business and vocational skills

In rural areas, women’s economic potential is often inhibited by traditional gender roles. At the NCCL coffee estates in Zambia, Olam has trained over 80 women in tractor and commercial vehicle operations. A study in 2020 of its impacts found that every woman driver reported improvements in their economic empowerment that enabled them to pay for schooling for their children, support relatives, improve housing, buy better quality food, and diversify their livelihoods by investing in other income-producing activities. Just as significantly, many of the women have said they have since been consulted on issues by their communities, and some had even taken leadership positions.

 

In a similar vein, our subsidiary ARISE is running an extensive project in Gabon to recruit women to be crane, dumper truck, excavator and other vehicle operatives. Backed with a major communication campaign and funding from CDC Group, the project aims to create a critical mass of female drivers (50+) that would encourage other women to consider driving as a profession and invest in getting a driving licence and apply for driving jobs.

 

Vocational training also plays an important role in creating additional income-generating activities to support farmers and their families through the off-season or periods of low prices. For example, 1,950 of our farmer suppliers and female members of the community in Ghana and Nigeria, are now trained as apiarists (bee keepers) and are topping up their incomes from cashew by as much as 15% from sales of honey and wax. (Read more)

 

Moving beyond the farmgate, we estimate that a further 150,000 people in our supply chains have improved livelihood potential from acquiring business skills, including literacy or numeracy training where needed. This includes initiatives from our Grains business, like our Bakery Schools in Nigeria which have supported around 5,000 bakers since 2018, with plans to reach many more through online training via our Bakewell App. We also have a programme in Senegal to help women become entrepreneur bakers, with the additional provision of IT and finance training, and scholarships for their children. 

 

 

5. Connecting farmers to the digital economy


Another hurdle is a lack of direct access to markets, either due to lack of identification or credit histories, or simply because of non-existent connectivity infrastructure. But without the means to find out what the global market is willing to pay for their products, and instead selling to the nearest intermediary, negotiating fair payment is an issue for a lot of small-scale farmers. 

 

It’s impossible for Olam to procure directly from all five million farmers in our sourcing network, so our suite of digital solutions is helping disrupt and transform our smallholder supply chains for the better. OFIS is digital-payment enabled, so we can pay farmers for their crops directly into a ‘mobile wallet’, allowing for the creation of credit histories and eventually, greater financial inclusion.

 

The Olam Direct app, has over 90,000 farmers from 10 origins registered to date, giving them access to market prices and the ability to negotiate and transact with us directly. It yields not only higher prices for their cocoa, coffee or other crop, but cost savings on their expenses, as Olam manages “last mile” collection. For Ghanaian cashew farmers using the app for instance, this means that if the average daily food budget for a typical household was is 14-15 Cedi ($2.40 - $2.58), they can receive funds worth another month of food.

 

Our Farmer Services Platform (FSP) connects farmers in remote locations with trusted buyers as well as financing and other services. The first FSP pilot started in India in December 2018 with the launch of the AgriCentral app, providing free services (weather, market prices, crop plan, crop care, news and a community forum) to farmers across several states. Today, there are 2.6mn farmers registered on the platform and it’s among the most widely used apps by farmers in India, with over 3.4 million downloads and at the end of last year, we launched a version in Indonesia.

 

 

6. Closing the living income gap


Perhaps one of the biggest debates is around how to ensure a living income for farmers, especially when prices are low. Despite industry efforts, including our own, millions of farmers still live below the World Bank’s extreme poverty line of US$1.90/day. Low incomes can in turn lead to child labour and deforestation as farmers seek to expand their land and keep children home to help out on the farm. Olam Cocoa has committed to achieving a living income for 150,000 farmers in their supplier network by 2030, while Olam Coffee has committed to enhancing the livelihoods of 200,000 coffee households by 2025 through living income gap strategies and solutions, in addition to advocating for a Price Stabilisation Fund.

 

Because crop prices are often set by governments, coupled with the challenge around viable farm size, the challenge is to find multiple paths to achieve these targets through a whole farm approach. Olam is therefore supporting income diversification, for example in Vietnam with the planting of cash crop fruit trees like durian and passionfruit alongside coffee bushes, as explained here. And as mentioned earlier, we’re investing in digital platforms to drive fair payment practices across third party chains, providing zero or low-interest micro-finance to support productivity and farm investment, and paying premiums for certified, verified or quality products.  

 

While we’re committed to making improvements in our own supply chains, questions on the living wage and living income also need to be addressed at sector level. Which is why we engage partners including development finance institutions like IFAD, and certification partners like Rainforest Alliance, to scale initiatives and help farmers become more resilient.

 

 

7. Monitoring progress towards long-term resilience


To ensure our efforts are paying off for farmers, we’re monitoring our progress through the 129 social metrics of AtSource, generated by farm-level data that’s collected by Olam’s 6,200 enumerators on the ground. Here’s a snapshot for our coffee supply chains...

This deep level of insight shows us where our interventions are working and equally, where they’re lacking or falling short. For instance, we can see from the dashboard that for the 51,274 cocoa farmers we work with in Ghana, there was a 99% increase in the number who received a farm management plan in 2019 compared with the previous year, which coincided with a 100% increase in the number of farm hectares rehabilitated, and a 54% increase in productivity per hectare.

 

We know that by seeking more and new types of collaborations, especially with communities themselves, we can increase our impact. Together, we have the tools and ingenuity to improve the livelihoods of farmers everywhere, and, in turn, improve the resilience of our supply chains that depend on them. After all, their resilience is our resilience.

 

Cornell: Access to Seeds Index 2019

Julie Greene | Vice President, Corporate Responsibility & Sustainability, Olam International